Day 3: The Best Laid Plans
Require Focus and Upkeep
by Edward Smith
08 Jul 2020
I'm not philosophically bad with money. I've read The Total Money Makeover by Dave Ramsey and I consider myself to be a very solid practitioner of the book's plan. For me, it's not just an idea. It is a systematic plan of action and it does what it says it does.
My household got into the book back in 2005. I've read it. I've reread it. I started listening to the podcasts, and I understand what Dave Ramsey is saying. I don't think of myself as smarter then Dave Ramsey. I don't think my plan is better then what Dave Ramsey presents. When I follow Dave's plan it works exactly as it is supposed to. I've lived the results.
I Didn't Give Up My Pet
If you listen to the Dave Ramsey show. You'll hear callers call in about student debt. These poor people were sold on the idea that going to college has to happen as part of living life, and it needs to happen even if you don't have the money to pay for it. When Dave Ramsey hears that these kids have twenty thousand dollars or more in student debt, he tells them to get rid of it.
Some of these kids argue back that they don't have a reason to get rid of their student loan, because it's different from other loans. They reason that their student loan doesn't really hurt them.
Maybe the school has agreed to let them delay having to pay the loan back, or maybe the school has promised that the government will eventually forgive the loan. In all of these cases Ramsey tells these kids to get rid of that debt as fast as possible. He tells them to not treat their student loans like a pet. The loan is not cute, and you don't want it hanging around. Get rid of it!
University's Are Like Overpriced Diamond Rings
When you think about it, the way we pamper student loans is ridiculous. It would be like the world telling you that you need to own a certain kind of luxury car that is out of your price range.
Luxury cars are not needs. They have the word luxury in their name. Universities like luxury cars are luxuries. Except when it comes to school, people associate school with smart, so anything having to do with going to school is going to be seen as doing something smart, while anything having to do with avoiding school is considered dumb.
This doesn't make sense when you really think about it. There are tons of schools in existence that will teach you smarts that don't come along with a diamond ring price tag. Paying for a university when you don't have money is like marrying someone that you love before you're ready to spend the money on a ring that you can't afford. You're not doing the right thing when you do that. Just wait.
No Matter It's Name: A Pet is Still a Pet
Pet ownership is a big responsibility. Only do it if you can afford to. When it came to my financial struggles, I had a pet that I didn't think about as a pet. I got used to ignoring it and began treating it like it was a family member. You don't get rid of family members by choice, and if given the choice you'll find a reason to keep it, even if it's harming you.
Since my pet wasn't mentioned in the Dave Ramsey show by name, and we weren't calling it by name, I assumed it didn't get looked at the same way as other pets. It's a good thing I didn't call into the Dave Ramsey show and ask about it. If I had done that. I would have been schooled on what pets look like and why I was a bad pet owner. Ignoring pets doesn't mean you don't have them.
In this situation, my pet was called "overspending". Every month I would feed this pet in small amounts. If you're taking care of a pet, you justify the expense as necessary. It's not like a bill where a person is ordering you to pay it. You want to pay it, and you feel okay about doing it because you love it.
It might not be a lot each time, but after a while these pet bills can get really big. In my case the bill was 15 years big. If given a choice, I would have refused to look at it, because I would have been too scared. That's a big bill. It would have been daunting. I would have wanted to stop. Thing is, I didn't want to.
My Pet is a Frog
If the cold water gets warmed up slowly the frog just sits there. That remains true even if the water becomes hot over time and becomes life threatening. The frog doesn't feel the pain immediately, and that results in a stupid frog getting cooked. (https://www.imdb.com/title/tt0497116/)
My spending habits were like the frog. I would do the overspending in amounts that don't look large on paper when you first see them. The problem is you don't store them in a pile and add them together, so you don't feel how big of a hit the problem has become.
My spending habits were like the frog. I would do the overspending in amounts that don't look large on paper when you first see them. The problem is you don't store them in a pile and add them together, so you don't feel how big of a hit the problem has become.
For example, if I buy a beer at twelve dollars, and buy two at once I spend twenty four dollars. It's not great, but it's affordable if that is the only thing that happens. Video games can cost more then that.
The problem with beer is you drink it, and it's gone so you don't see it anymore. Now when you look around for a beer you realize you need another beer. So you buy another round of beers and you've now spent another twenty four dollars. Then the next week rolls around and you have no beer so you decide to do it again.
The same thing can happen each day. If you believe that every day is a new day that comes along with a clean slate you begin to teach your brain to be okay with repeating and rinsing. The problem here is that when you do it for fifteen years you give up something else and that something else can be very large.
To pay off my house I need fifty grand. I'm really happy about this, because I worked hard, and I'm almost done (my house is worth 500k). The question here is, what if I had saved every beer I ever bought and invested it? At twenty four dollars a week times fifty two weeks in a year I could have saved $1,248 bucks a year.
The problem with beer is you drink it, and it's gone so you don't see it anymore. Now when you look around for a beer you realize you need another beer. So you buy another round of beers and you've now spent another twenty four dollars. Then the next week rolls around and you have no beer so you decide to do it again.
The same thing can happen each day. If you believe that every day is a new day that comes along with a clean slate you begin to teach your brain to be okay with repeating and rinsing. The problem here is that when you do it for fifteen years you give up something else and that something else can be very large.
The Opportunity Cost of Drinking Beer
To pay off my house I need fifty grand. I'm really happy about this, because I worked hard, and I'm almost done (my house is worth 500k). The question here is, what if I had saved every beer I ever bought and invested it? At twenty four dollars a week times fifty two weeks in a year I could have saved $1,248 bucks a year.
If I had done that for fifteen years I could have saved or paid off $18,720 bucks of the $50,000 balance, not including interest that I would have earned. That's what opportunity cost is about. It's identifying the stuff that you give up when you decide to do something else instead.
Now to be honest, a lot has happened during those fifteen years. I wasn't always paying for a house like I am today, but that doesn't mean I didn't lose something during this scandal. I could have been planning and paying ahead for the next thing that I wanted later. That would have been wise, and it would have made the whole thing easier.
Self Reflection
Now to be honest, a lot has happened during those fifteen years. I wasn't always paying for a house like I am today, but that doesn't mean I didn't lose something during this scandal. I could have been planning and paying ahead for the next thing that I wanted later. That would have been wise, and it would have made the whole thing easier.
If I had invested the money, it would have probably paid for my house by now in entirety. I'd be telling this story in the past tense instead of talking about it in the present. With things covered, I could have been saving for other amazing things. I will never know. I bought beer.
Conclusion
The cool thing about opportunity cost though, is it can start being brought into play today. I don't have to continue doing what I've been doing for the last fifteen years. The next fifteen years can be whatever I want those years to be. Instead of squandering $18,720, I can save it up instead.
True. It won't be the original $18,720, but this $18,720 dollars comes with an education. I'll take this education over getting an extravagant, diamond ring sized loan. This lesson is lived. It can be passed onto my kids for free.
My kids don't have to pay for the same lesson. I already paid for it. If I make the right choices, starting now, and build up the money the way I'm supposed to, I can actually show my kids the balance. Class dismissed!
Want to know more? Check out this next article.
Want to know more? Check out this next article.
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